How China plans to break free from technological ‘shackles’

For more than four years, Chinese President Xi Jinping has delivered speeches and inspections across the country with an important message—China needs to reduce its reliance on critical technologies imported from abroad. At a conference in 2020, Xi implored researchers to work to break through “bottlenecks” or “shackled” technologies. These are important areas of technology that cannot be easily produced domestically in China. They are often referred to as being “controlled by others,” especially in Chinese state media.

China’s leadership is concerned after export controls on Chinese corporate champions such as Huawei and coordinated global sanctions against Russia following Russia’s invasion of Ukraine. China could be cut off from more imports. Bottleneck technology makes China vulnerable.

As Xi Jinping speaks in 2020, the government is sifting through China’s vast array of laboratories, centers, institutes and companies to assess which are working to help the country navigate an increasingly unpredictable geopolitical environment.

Five years ago, the Chinese government decided to consolidate a group of engineering labs and centers to help companies develop new products using research from various research institutes, usually universities. These institutions, known as National Engineering Research Centers or NERCs, have now been restructured to meet the challenge of technological self-reliance. Earlier this year, the Chinese government released a new list of 191 NERCs selected from 131 national engineering centers and 217 national engineering laboratories. Almost half did not make the cut.

One of the centers added to the new list is the National Electronic Design Automation Engineering Research Center. The center is not as well known as the company it is affiliated with. Empyrean Technology has recently emerged to challenge foreign (mostly U.S.) global leaders in the software needed to design computer chips. The company is backed by a Chinese state-owned enterprise and has central government funding aimed at turning the new technology into a commercial product. If things go according to Empyrean’s plan, it will “completely replace” foreign manufacturers by 2025, and it will join Cadence and Synopsys as the global market leader by 2030. Whether it will achieve those goals is another matter.

The work of the center and its company corresponds to areas that have been identified elsewhere as choke points.In a report published by the Center for Security and Emerging Technologies, Ben Murphy synthesizes 35 articles first published by Chinese state newspapers Science and Technology Daily 2018 identified a specific set of technologies as bottleneck technologies. These 35 technologies are frequently cited by Chinese research institute heads, Chinese innovation experts, and Chinese industry insiders to explain how their work is guided.

Centers like Empyrean are now governed by an updated set of rules that specifically focus on stabilizing supply chains and addressing “bottlenecks.” A new set of pilot guidelines for evaluating NERC requires center leaders to submit a 2,000-character narrative describing how their work contributes to the development of bottleneck technologies.

Inspired by research institutions such as Argonne National Laboratory in the United States and the Helmholtz Association in Germany, Chinese leaders released plans in 2017, which proposed the establishment of three types of “national science and technology innovation bases.” The categories are “Scientific and Engineering Research”; “Science and Technology Innovation and Transformation of Achievements”; and support efforts to provide conditions for the success of the first two bases.

NERC falls into the second category – achievement transformation or technology transfer. State and state key laboratories are designed to focus on the first category. They will “target the international frontier” for more fundamental research while keeping in mind the “national strategic goals”. For example, the National Science and Technology Resource Sharing Service Platform carries out the third type of work. This includes things like data sharing and storing experimental material.

NERC’s mission is to act as “a bridge between industry development and technological and scientific innovation.” The reorganization of the National Energy Center aims to “firmly implement the innovation-driven development strategy, serve economic and social development, and [and] Support the research and development of key core technologies. The Innovation-Driven Development Strategy is a signature policy promulgated in 2016 to strengthen Chinese industry through innovation. When evaluating engineering centers based on their contribution to breaking “bottlenecks,” the Chinese government has cited supply chain security as a feature of this larger industrial upgrading effort.

It is in a place like NERC that we expect the development of technology to be ready for the market. Earlier this year, Chinese state media reported that the National Communications Software and Application-Specific Integrated Circuit Design Engineering Research Center had developed a domestic version of the RapidIO interconnect. Interconnect or switch chips play an important role in data transfer in wireless and avionics applications. RapidIO is an open standard architecture from the late 1990s, and its development has been dominated by non-Chinese companies such as Texas Instruments and Ericsson. This NERC chip was touted as a challenge to their dominance.

In addition to supporting civilian industry development, NERC also plays a role in dual-use his book Innovation Dominance: The Rise of China’s Technological Security Nation, Tai Ming Cheung identified 11 NERCs (from the group prior to the 2021-22 restructuring) located within entities linked to the Chinese military-industrial complex. Several are included in the new sequence. For example, NERC, which developed the RapidIO prototype, is hosted at China Electronics Technology Corporation’s 54 research institutes. The institute is on the US Entity List.

NERC’s work directly challenges the so-called dependency myth that continues to prevail in the public debate. The myth says that most Western countries are dependent on China because it imports key manufacturing inputs and raw materials. However, China is also acutely aware of its dependence, especially in certain high-tech fields. What’s more, China’s leaders are restructuring parts of the innovation system to ease its dependence.

Policymakers, especially those in the United States, Europe, and East Asia, should be aware that these larger systemic efforts are underway and assess their dependence on China and China’s dependence on them.

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